What Is a “Spend Down” in Medicaid Planning?

A spend down is a situation in which someone applied for Medicaid coverage and was denied because they had too much money, known as excess income. However, in some cases, people may be able to reduce their excess income through the spend-down process and become eligible for Medicaid.

Think of a spend down as akin to a health insurance deductible. When you have that type of deductible, you must pay your medical costs until you meet the deductible. At this time, the health insurance pays most or all of your medical expenses for the rest of the year as defined by your health insurance policy (usually a calendar year).

The spend down works in a similar way. When the cost of your medical bills becomes greater than your excess income, you become eligible for Medicaid for that month. Keep in mind that you have to pay out of pocket for the amount up to the threshold of the excess income, while Medicaid will pay the bills over the amount of the excess income.

However, if your medical bills are because you were hospitalized within six months of applying for eligibility, Medicaid may agree to cover you for up to six months. This is something a long-term planning and Medicaid attorney could help you with. If you have been hospitalized recently, you may qualify for Medicaid for up to 6 months.

What medical bills and expenses can be counted toward a spend down?

There are several medical bills and expenses that can be counted, depending on the makeup of your household. 

• Your and/or your spouse’s/ medical bills. 
• Bills parents receive for their child’s spend down. 
• Bills either for a child living with you or for a child who does not live with you but whose medical bills you pay either in full or part, depending on the terms of child support and/or custody. 
• Unpaid medical bills of up to six years old for yourself or any of the people named above. 
• Parts of medical bills not covered by Medicare or any private insurance you may have. 
• Medical expenses paid on your behalf by public programs, including the Child Health Insurance Program (CHIP) or the Elderly Pharmaceutical Insurance Program (EPIC), including insurance premiums. 
• Both paid and unpaid medical bills which have recently accrued. 
• Costs owed to therapists, drug and/or alcohol programs, nurses, and personal care attendants and/or home health aides if required by a doctor. 
• Out-of-pocket prescription drug costs. 
• When required by a doctor, costs involving medical and surgical supplies and equipment, prosthetic devices, and assistive devices such as hearing aids and eyeglasses. 
• Sometimes, but not always, any transportation expenses to get medical services. 

Are there expenses that Medicaid will not pay, but which apply toward a spend down?

Yes, there are some expenses for things not paid by Medicaid, but which they allow to be applied toward a spend down. 

• Medical services either not covered by Medicaid or from health care providers who aren’t part of Medicaid. 
• Some over-the-counter drugs and medical supplies if they’re determined to be medically necessary or ordered by a doctor. 

Note that bills for cosmetics (surgery or office procedures and other nonmedical items are not eligible for a spend down. 

What Are Medicaid’s Income Restrictions?

The answer to that is complicated by the fact that it varies by state and the number of people in a household. In 2022, the majority of states capped the income at $2,523 for a single person and $5,046 for a married couple. In many cases, these limits apply to people who are nursing home-type residences or receive community-based services. Currently only Idaho has a slightly higher income limit, while some states have lower income caps or have restrictions that effectively lower the cap.

Some states theoretically have no income caps, but in some cases, they have other restrictions that act as caps. In other states, the income caps are set depending on the cost of the medical care received. That means that someone’s income must not exceed the cost of the care they receive, or they’re not eligible for Medicaid. One state (Missouri) has rules requiring people who live in nursing homes to have all of their income going to the costs of the nursing home. 

Because there is so much variation, it’s worth working with an attorney experienced in this area. 

Who Is Eligible for a Medicaid Spend Down?

Medicaid has restrictions on who can use a spend down to qualify for a spend down. Here are the groups that qualify:

• Adults aged over 65 years  
• Children aged under 21 
• People who are disabled or blind 
• Families with one or both parents absent or dead, disabled, or out of work 

If Medicaid denies your application for full coverage, the notice must include the reason(s) you’ve been denied. If it’s because of excess income, that notification will explain if you qualify for a spend down. If you are, it will also detail how much the spend down must be to qualify for Medicaid coverage. 

What Should I Do if I Want to Apply for Medicaid but Worry My Income is Too High?

Call us at 832-422-7333 for a free, in-depth, no-obligation discovery call. Our firm focuses on special needs, disability-related law, and long-term planning and Medicaid needs. Medicaid is an essential part of many people’s long-term planning, but it’s a complicated, confusing process to go through. We’re here to help you learn how to maximize your Medicaid benefits and clear potential obstacles in the process.